Europe is hitting the ceiling – Newspaper Kommersant No. 167 (7368) of 09/10/2022

The EU countries have so far disagreed on the introduction of a ceiling on prices for imported Russian gas. Countries such as Hungary, which are completely dependent on Gazprom’s supplies, opposed it, and a proposal to cap the cost of all gas imports to the EU did not win the necessary votes. Experts call the proposal of the European Commission on the price ceiling absurd, since its adoption will stop supplies from Russia and cause a new jump in prices in the upcoming heating season.

At an emergency meeting on September 9, EU energy ministers failed to agree on imposing a price cap on Russian gas imports, Hungarian Minister of Foreign Affairs and Foreign Economic Relations Peter Szijjarto said, and several other officials confirmed. According to unofficial data, the European Commission proposed a ceiling of €50 per MWh (about $540 per 1,000 cubic meters), which is about four times lower than current prices. In addition, at the suggestion of a number of countries, the introduction of a price limit on all imported gas in Europe, including LNG, was discussed. In the latter case, it was required that the initiative be supported by more than half of the 27 countries of the bloc, while in the case of Russia, unanimous approval was required, since we are talking, in fact, about sanctions.

In the meantime, as Italian Minister for Environmental Modernization and Transformation Roberto Cingolani clarified, 15 EU countries support the idea of ​​​​introducing a general gas price cap, and three countries are in favor of introducing a price ceiling only for Russian raw materials (including France and Estonia). Another five states have spoken out against or are neutral on the issue of restrictions. Among them is Hungary.

According to Peter Szijjártó, Budapest does not in any way support the introduction of the limit due to the risks to the energy supply.

According to him, it is obvious that the introduction of a price ceiling will lead to the cessation of gas supplies from Russia. Other EU member states also spoke out against the limit on gas pipeline transportation, he said. Thus, the Czech Republic proposed to remove this issue from the agenda. The official said nine EU countries either opposed the price cap or made reservations about the proposal.

At the same time, Belgian Energy Minister Tien van der Straten said that “not many EU countries are completely against the introduction of price caps.” Belgium itself, along with Poland, supports this measure not only in relation to Russian, but also to all imported raw materials. “The ceiling on Russian gas is not enough, we need restrictions on all gas in order to be able to control our bills in order to lower energy prices,” she said. In turn, Leonore Gewessler, Minister for Climate Protection, Ecology, Energy, Transport, Innovation and Technology of Austria, noted that the country cannot currently support the EC initiative, given that it is half dependent on Russian supplies.

At the same time, the European Commission is not going to abandon the idea of ​​introducing a ceiling on prices and intends to intensify contacts with countries that are most dependent on Russian gas and cannot find alternative ways of supply.

Next week, Brussels will summarize the proposals of the ministers and formulate further proposals.

Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, notes that if all of a sudden measures are taken, this will seriously hit Gazprom’s revenue. According to the expert’s calculations, the company’s export volume has already decreased to about 40% from last year’s level, and the average price may be about $1-1.5 thousand per 1 thousand cubic meters. But even such a significant rise in gas prices no longer fully compensates for the drop in supplies to Europe. In January-August 2022, Gazprom reduced exports to non-CIS countries by 37.4%, to 82.2 billion cubic meters in annual terms.

According to Mr. Yushkov, an additional restriction of gas supplies to Europe during the heating season would be an absurd decision, since the EU understands that the introduction of a ceiling on the price of Russian gas is the way to stop supplies.

And with the departure of these volumes, the rest of the gas on the market will seriously rise in price. Even stranger Igor Yushkov considers proposals to impose restrictions on all gas entering Europe. He believes that then LNG suppliers will simply redirect these volumes to Asia.

Alexei Grivach, deputy head of the FNEB, agrees that the idea looked like a provocation from the very beginning, since it can only lead to an increase in prices on the market. Incomplete payment for gas supplied under Gazprom contracts will automatically stop deliveries to non-payers, the expert adds. According to him, supplies to the EU have already decreased by more than 80% compared to the usual level as a result of sanctions infrastructure restrictions and force majeure. At the same time, Mr. Grivach notes, Gazprom already received more profit in the first half of the year than in the entire last year, so now there can be no talk of a deterioration in its financial position.

Olga Mordyushenko